This paper examines the role of the information contained in stock prices in the regulation of privatized firms. Stock prices contain noisy but unbiased information about firm's future prospects that regulators can use to decide on some regulatory policies. The main argument developed is that the observation of stock price movements reduces the incentives of regulators to develop their own monitoring technologies and can allow them to commit to relatively lighthanded regulations. This protects firm's investments in cost reduction activities and can increase ex ante welfare.

This article studies the link between public trading and the activity of a firm's large shareholder who can affect firm value. Public trading results in the formation of a stock price that is informative about the large shareholder's activity. This increases the latter's incentives to engage in value-increasing activities. Indeed, if he has to liquidate part of his stake before the effect of his activity is publicly observed, a more informative price rewards him for his activity. Implications are derived for the decision to go public, capital structure, and security design.

We propose a model of equilibrium contracting between two agents who are “boundedly rational” in the sense that they face time costs of deliberating current and future transactions. We show that equilibrium contracts may be incomplete and assign control rights: they may leave some enforceable future transactions unspecified and instead specify which agent has the right to decide these transactions. Control rights allow the controlling agent to defer time-consuming deliberations on those transactions to a later date, making her less inclined to prolong negotiations over an initial incomplete contract. Still, agents tend to resolve conflicts up-front by writing more complete initial contracts. A more complete contract can take the form of either a finer adaptation to future contingencies, or greater coarseness. Either way, conflicts among contracting agents tend to result in excessively complete contracts in the sense that the maximization of joint payoffs would result in less complete contracts.

We propose a model of costly decision making based on time-costs of deliberating current and future decisions. We model an individual decision-maker's thinking process as a thought-experiment that takes time, and lets the decision maker ‘think ahead’ about future decision problems in yet unrealized states of nature. By formulating an intertemporal, state-contingent, planning problem which may involve costly deliberation in every state of nature, and by letting the decision maker deliberate ahead of the realization of a state, we attempt to capture the basic observation that individuals generally do not think through a complete action plan. Instead, individuals prioritize their thinking and leave deliberations on less important decisions to the time or event when they arise.

This article studies the link between public trading and the activity of a firm's large shareholder who can affect firm value. Public trading results in the formation of a stock price that is informative about the large shareholder's activity. This increases the latter's incentives to engage in value-increasing activities. Indeed, if he has to liquidate part of his stake before the effect of his activity is publicly observed, a more informative price rewards him for his activity. Implications are derived for the decision to go public, capital structure, and security design.

We provide a formal analysis of the notion that conglomerates are more ‘entrenched’ as they have ‘deeper pockets’. Using the financial contracting model of Bolton and Scharfstein (1990), we can isolate two effects that confirm this conjecture: the pooling of cash flows, which allows to smooth out repayments, and the ability to obtain better credit terms. For less profitable business segments, the internal capital market operated in a conglomerate may, however, work in the opposite direction, increasing the sensitivity of operations to own cash flows and increasing the likelihood of exit.

This paper shows that supervision with soft information is valuable whenever supervisors and supervisees collude under asymmetric information and proceeds then to derive an Equivalence Principle between organizational forms of supervisory and productive activities. We consider an organization with an agent privately informed on his productivity and a risk averse supervisor getting signals on the agent's type. In a centralized organization, the principal can communicate and contract with both the supervisor and the agent. However, these two agents can collude against the principal. In a decentralized organization, the principal only communicates and contracts with the supervisor who in turn sub-contracts with the agent. We show that the two organizations achieve the same outcome. We discuss this equivalence and provide various comparative statics results to assess the efficiency of supervisory structures.